November 6, 2009
Social aims are accorded a prominent, if not always equal, weight in the EU agenda. Accordingly, the spectre of ‘social Europe’ haunts any debate on the state and the prospects of European integration. Seeking to shed some light on the future of the social dimension of the EU, we have recently produced a short paper in the framework of the EU-CONSENT network of excellence[i], titled ‘The budgetary dimension of ‘social Europe’; scenarios and strategies for the future’. This article is a short version of the paper that briefly discusses these scenarios that seem a) more likely than others and b) more acceptable than others.
In our view, the term ‘social Europe’ – traditionally associated with social and labour market policies – encompasses also a territorial dimension. Traditional social policies often focus on individuals without taking account of the fact that their well-being and the effectiveness of policy strongly depend on the place where they live. Accordingly, there is tendency to follow what might be described as a de-contextualised individual approach, often with a strong non-egalitarian bias. At the same time, place-based policies can make the serious mistake of referring to places almost as if they had a well-being of their own with the consequences for individuals getting lost. The gap between the average well-being of a place and other places is then taken to represent the “inequality” of the people living there; and the policy for reducing the gap is termed “social”. As the Barca report correctly argues, a new combination of the social and the territorial agenda is required.
Social Europe is a two-level government assignment. For a host of social, political and economic reasons, the lower level – the member state – has a much richer and stronger role than the EU level. This asymmetry is clearly reflected in the size and the functions of the EU budget. On the one hand, the EU budget is small compared to the size of national budgets or those of federal governments. On the other hand, both theory and practice militate against fiscal centralization at the EU level. That being said, it is worth noting that the main items of EU expenditure are linked to social Europe. The largest single EU expenditure item for the period 2007-2013 is the – reformed – Common Agricultural Policy (CAP), representing 42% of total resources, followed by cohesion policy with 35%, while expenditure programmes directly related to the Lisbon objectives account for another 9% of overall spending.
The debate on the reform of the EU budget will officially start only after the Commission produces a comprehensive review of both the income and expenditure sides. However, as all indications agree, national governments have no appetite for any large increase in total EU expenditure in real terms. The forthcoming debate is then likely to stay within the range of 1 to 1.5% of GNI. Within this context, we think that a ‘status quo plus’ scenario would be the most feasible (and not inappropriate) for social Europe in the budgetary field. By this, we are referring to a continuation of the status quo with the addition of some enhancements and some adjustments to externalities. A second scenario, termed ‘re-invented EU’, is appropriate but infeasible. Finally, a third scenario, called ‘spill-back’, is both infeasible and inappropriate.
The ‘status quo plus’ scenario is based on a budgetary constraint of 1% of the GNI and on the acquisition of common policies. It ensures a reduction of the CAP accompanied by partial re-nationalisation, maximum preservation of a ‘dual’ cohesion policy (helping the new member states to ‘catch-up’ and, simultaneously, devoting resources to promote economic reform in the name of ‘Lisbon’), a slight increase in the heading on ‘competitiveness’, and, most likely, a new but small instrument aiming at stimulating comprehensive and socially responsible labour market reform.
The realisation of the scenario of a ‘re-invented EU’ would lead to a EU richer in fiscal means – perhaps in the area of a 1.20% GNI limit – and potentially (more) redistributive. Following the experience of the Globalisation Adjustment Fund, the Union would provide transfers enabling establishment of a common “welfare floor” to deal with immigrants shopping for higher welfare benefits, or funding labour market and social protection reforms, especially providing for the compensation of losers. The resources of CAP would be slightly reduced, without, however, any expenses transferred to national budgets. Finally, in the realm of cohesion policy, an increase in overall spending would be accompanied by new eligibility rules for ‘special’ and/or ‘handicapped’ areas; upgrading of the strategic dimension of cohesion (i.e. stronger ties with the Lisbon Strategy), relaxation or abolishment of the ‘n+2 rule’, increased funds for employment and training measures, less demanding managerial requirements and more emphasis on institution-building. The fulfillment of this scenario, however, is strongly undermined by both the divergence between national interests – and specifically by the determination of the ‘net contributors’ (UK, Germany, Sweden, the Netherlands, Denmark and Austria to limit) EU expenses not related with the provision of public goods (in their own, restricted sense), as much as possible – and by the existing decision making rules.
The ‘spillback’ scenario would entail a further reduction of EU’s own resources as a percentage of GNI, the curtailment of both the CAP and cohesion policies and only a slight increase in the ‘competitiveness’ heading. The validity of this last scenario would have been great were it for different economic and political circumstances. However, the current economic crisis has greatly contributed to the legitimization of views stressing the merits and the necessity of fiscal activism in social policy. It is reasonable, then, to expect that most EU players will adopt a more positive stance towards EU expenditure in the social realm and that additional cuts in the EU budget will be ruled out.
Giorgos Andreou is lecturer at the Aristotle University of Thessaloniki, Department of Political Sciences.
Nikos Koutsiaras is lecturer at the University of Athens, Faculty of Political Science and Public Administration.Author : blogs@ELIAMEP